Tuesday, September 24, 2013

Two from Paul Krugman. The first echoes the point I make in
my column today about the attempt to use fear over the debt (and hence the need for austerity) as an excuse to
dismantle the welfare state:

What’s It All About Then: Simon Wren-Lewis writes with feeling about the
“austerity
deception“; what sets him off is a post that characterizes the whole
austerity debate as being about “big-state” versus “small-state” people.

Wren-Lewis’s point is that only one side of the debate saw it that way.
Opponents of austerity in a depressed economy opposed it because they
believed that this would worsen the depression — and they were right.

Proponents of austerity, however, were lying about their motives. Strong
words, but if you look at their recent reactions it becomes clear that all
the claims about expansionary austerity, 90 percent cliffs and all that were
just excuses for an agenda of dismantling the welfare state. ...

But I think growing inequality is a big driving force behind this effort.

And since I've complained in past columns that fiscal policy has not received enough attention (particularly how bad it's been), it's nice to see this:

But we’re clearly still well below potential. And we’ve also had exactly the
wrong fiscal policy given that reality plus the zero lower bound on interest
rates, with unprecedented austerity. So, how much of our depressed economy
can be explained by the bad fiscal policy?

To a first approximation, all of it. By that I mean that to have something
that would arguably look like full employment, at this point we wouldn’t
need a continuation of actual stimulus; all we’d need is for government
spending to have grown normally, instead of shrinking. ...[does calculations to show this]...

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What's It All About Then?: The Real Reason for the Fight over the Debt Limit

Two from Paul Krugman. The first echoes the point I make in
my column today about the attempt to use fear over the debt (and hence the need for austerity) as an excuse to
dismantle the welfare state:

What’s It All About Then: Simon Wren-Lewis writes with feeling about the
“austerity
deception“; what sets him off is a post that characterizes the whole
austerity debate as being about “big-state” versus “small-state” people.

Wren-Lewis’s point is that only one side of the debate saw it that way.
Opponents of austerity in a depressed economy opposed it because they
believed that this would worsen the depression — and they were right.

Proponents of austerity, however, were lying about their motives. Strong
words, but if you look at their recent reactions it becomes clear that all
the claims about expansionary austerity, 90 percent cliffs and all that were
just excuses for an agenda of dismantling the welfare state. ...

But I think growing inequality is a big driving force behind this effort.

And since I've complained in past columns that fiscal policy has not received enough attention (particularly how bad it's been), it's nice to see this:

But we’re clearly still well below potential. And we’ve also had exactly the
wrong fiscal policy given that reality plus the zero lower bound on interest
rates, with unprecedented austerity. So, how much of our depressed economy
can be explained by the bad fiscal policy?

To a first approximation, all of it. By that I mean that to have something
that would arguably look like full employment, at this point we wouldn’t
need a continuation of actual stimulus; all we’d need is for government
spending to have grown normally, instead of shrinking. ...[does calculations to show this]...